A landmark decision of the Alberta Court of Appeal (“ABCA”) in Sandhu v Siri Guru Nanak Sikh Gurdwara of Alberta, 2015 ABCA 101 [Sandhu], extends the oppression remedy outside of the corporate context and into the governance of religious organizations. Where governing members of religious organizations act oppressively, Alberta’s Religious Societies’ Land Act, RSA 2000, c R-15 [RSLA], permits other members to apply to a court and have the organization wound up. Members of Edmonton’s Siri Guru Nanak Sikh Gurdwara (“the Society”) made a successful claim under this provision, leaving an Alberta Chambers Judge to decide between winding up the society or fashioning a less severe remedy.

Choosing the latter option, the judge designed a remedy that restructured the religious society’s governance and internal processes. Though intrusive, the remedy was upheld by the ABCA as an appropriate exercise of courts’ equitable jurisdiction in cases of oppression.

Facts

Having been incorporated as a congregation under the RSLA, the Society owned and operated a Sikh temple in the Edmonton area. According to its bylaws, the Society was governed by both an Executive Committee and a Religious Committee. The Religious Committee evaluated membership applications and appointed the Executive Committee. The Executive Committee nominated members to the Religious Committee, subject to approval by the membership.

Sakattar Singh Sandhu and Baldev Singh Hundle (“Sandhu and Hundle”) each had belonged to the Society for nearly 20 years. Both alleged that the Society had engaged in oppressive practices by denying approximately 80 membership applications in order to prevent the entry of new members who would support Sandhu and Hundle for membership to the Executive or Religious Committees. Accordingly, Sandhu and Hundle sought a winding up of the Society under Section 25 of the RSLA.

The Rationale for the Oppression Claim

Section 25 of Alberta’s RSLA enables members of a religious society to apply to have that society wound up. To succeed in such an application, members must prove that the society’s conduct falls under one of the categories that would warrant dissolving a corporation under Alberta’s Business Corporations Act, RSA 2000, c B-9 [BCA]. As set out in Section 215 of the BCA, oppressive conduct by the directors of a corporation constitutes one such category.

The Decision of the Chambers Judge

The Chambers Judge determined that the case of oppression had been made out but opted against the drastic remedy of winding up the Society (see 2013 ABQB 646).

In making its case, the Society first presented an affidavit admitting that approximately 80 applications for membership had been rejected for political reasons. Although a second affidavit was later submitted to indicate that the rejections were made for non-political reasons, the Chambers Judge gave it little weight after concluding that its late submission was intended to engineer a delay.

The fact that the Society was a religious organization did not exempt it from obligations to fairly uphold its bylaws in accordance with the RSLA. The Judge highlighted that the oppression claim originated from a disagreement over control of the Society’s governance, not religion or religious interpretation per se.

On finding that the Society had rejected membership applications for political reasons, the Judge determined that the organization had violated its own bylaws and denied fairness to applicants. Accordingly, the case for oppression was made out.

In fashioning a remedy, the Chambers Judge determined that the winding up of the society was too drastic. Instead, the Judge fashioned a remedy that restructured the Society’s bylaws and membership applications process, designated himself as case manager to oversee the change. Central to the restructuring was the creation of an Arbitration Board to appoint new members.

The Decision on Appeal

The ABCA upheld both the Chambers Judge’s finding of oppression and his remedy.

With respect to the finding of oppression, the ABCA affirmed that “not all disputes within a religious society are religious” (para 53). Accordingly, an oppression claim based on the governance of a religious society is subject to the same test as oppression claims against the directors of corporations. As set out by the Supreme Court in BCE Inc v 1976 Debentureholders, [2008] 3 SCR 560, oppression entails a breach of reasonable expectations that amounts to oppression, unfair prejudice, or unfair disregard. In the case of the Society, the rejection of new applicants in bad faith and without procedural fairness met this test.

With respect to the remedy, the ABCA affirmed that, in cases of oppression, the RSLA and BCA operate together to authorize judges to amend the bylaws and restructure the application processes of religious societies. Citing Keho Holdings Ltd v Noble, 1987 ABCA 84, the ABCA emphasized that the exercise of equitable jurisdiction over oppression claims entails fashioning remedies to “ensure the settlement of disputes rather than strict adherence to legal rights” (para 50).

At the same time, a remedy for oppression must uphold the limits set out by the Ontario Court of Appeal in Naneff v Con-Crete Holdings Limited(1995), 23 OR (3d) 481, such that claimants are not left better off than they would have been absent the oppressive conduct. In rendering a remedy that permitted the Society to continue operating while upholding the procedural rights and reasonable expectations of its members, the Chambers Judge had acted in accordance with and within the bounds of his equitable jurisdiction.

Implications

The ABCA’s judgment affirms the flexibility of oppression remedies as a source of equitable recourse for those who are denied fairness in an organization. A notable reason behind the ABCA’s affirmation of the Chambers Judge’s intrusive remedy was that it was less drastic than the winding up remedy made available by the RSLA.

A similar logic has been adopted by the Supreme Court in the employment context in McKinley v BC Tel, [2001] 2 SCR 161 – which recognized employers who are legally entitled to terminate employees as having increased latitude to take disciplinary actions against those employees. Defendant organizations will thus have little recourse against courts’ intrusive remedies where a finding of oppression would suffice to justify winding up the organization in its entirety. Rather, both the ABCA and the Chambers Judge in Sandhu emphasize the importance of careful drafting and adherence to bylaws, regardless of the nature of the organization.

At the same time, the ABCA left it open for a different test of oppression and different remedies standards to be applied where oppression claims under the RSLA pertain to matters of religion rather than governance. The determination of any such differences remains reserved for future claims that turn on them.